China’s retail industry remains behind the curve in-store innovation, which stands as a hurdle to the Chinese market’s inevitable dominance in global retail.
The observation was among several key insights shared by 7Fresh head Jonathan Wang in a recent interview circulated by JD, which owns the 7Fresh omnichannel fresh-food supermarket business.
“The key factors driving global retail transformation are quite simple: channel reformation, store format innovation and supply chain management,” said Wang. “China is already leading the global retail industry in channel reformation and digitizing the supply chain, but is still lagging behind the leading players, such as the US and Japan in terms of store innovation.”
Wang noted that the scale of China’s e-commerce sector currently exceeds that of the US, UK and Japan combined. Despite this lead, China’s traditional offline retailers receive less than 5 percent of their revenues from online channels.
“In China, some omnichannel supermarkets are far more advanced than those of leading Western supermarkets,” said Wang. “Many Chinese shoppers today are accustomed to ordering online and getting live and fresh seafood, fruits and vegetables, and other produce delivered to their doorsteps within 30 minutes. This is still far from the norm in most major US cities.
“At 7Fresh supermarkets, online orders typically account for 40 percent to 45 percent while the proportion reached nearly 70 percent in February when Covid-19 was peaking in China. The company’s advanced supply chain technology was clearly the lynchpin to provide the superior omnichannel retail experience.”
While China’s online business has proven its strength in navigating emerging opportunities, offline retail remains rooted in its store formats. At the same time, the Chinese middle class is growing, along with its desire to spend an increasing disposable income on quality items – exhibiting what is perhaps China’s most rapidly evolving set of consumer habits, tastes, expectations, and buying patterns in recent history.
“It may be that the retail industry used to be relatively low-key, but since the industry has drawn much greater attention nowadays, people started to become aware of the ‘sexy’ aspect of retail,” said Wang.
“Most of 7Fresh’s systems are designed as SaaS systems so that they can be adapted easily and quickly. Thanks to digitization, JD’s 7Fresh supermarket was able to break even within one year and a half. Its sales efficiency is three times that of a regular supermarket. Establishing 7Fresh is about exploring retail’s best practices, and we wish to share this excellence with the industry to make a positive impact and improve its capacity overall.”